"As the United States and Iran come closer to a...nuclear deal, many U.S. states
are likely to stick with their own sanctions on Iran that could
complicate any warming of relations between the long-time foes. In a little known aspect of Iran's internationalisolation,
around two dozen states have enacted measures punishing
companies operating in certain sectors of its economy, directing
public pension funds with billions of dollars in assets to
divest from the firms and sometimes barring them from public
contracts.

In more than half those states, the restrictions expire only
if Iran is no longer designated to be supporting terrorism or if
all U.S. federal sanctions against Iran are lifted - unlikely
outcomes even in the case of a final nuclear accord. Two states,
Kansas and Mississippi, are even considering new sanctions
targeting the country.

The prospect of unwavering sanctions at the state level, or
new ones, just as the federal government reaches a landmark
agreement with Iran risks widening a divide between states and
the federal government on a crucial foreign policy issue.

Though U.S. states have often coordinated their measures
with federal sanctions on Iran, their divestment actions
sometimes take a tougher line on foreign firms with Iran links
than is the case under federal policy.

A final accord, which is still being negotiated ahead of a
June 30 deadline, would likely lift U.S. sanctions on Iran's
crude oil sales to other countries and loosen restrictions on
Iran's financial system. Federal sanctions on Iran tied to
issues such as human rights and terrorism would remain in place.

Among around a dozen states contacted directly by Reuters,
legislators in Georgia, Florida, and Michigan said they had no
intention of changing their Iran policies even in light of a
federal deal. State officials in Connecticut and Illinois said
new local legislation would be needed to change their divestment
policies, even if a deal were signed.

Officials in New York and Oregon told Reuters they would
look to changes in law at the federal level in the case of a
nuclear deal to determine how it would affect their policies.

Officials at Iran's mission to the United Nations did not
immediately respond to a request for comment from Reuters on the
state policies. White House spokeswoman Bernadette Meehan did
not respond directly to a Reuters query about states' sanctions
policies, but stressed that only sanctions related to Iran's
nuclear program would be affected by a deal.

The first divestment campaigns gathered steam in 2008 and
2009, and received a federal stamp of approval in 2010 with
passage of the Comprehensive Iran Sanctions, Accountability, and
Divestment Act, which encouraged states to pass such measures.

BIPARTISAN SUPPORT

The divestment measures typically enjoy broad bipartisan
support within the legislatures, and have been signed into law
by Republican and Democratic governors alike. Critics of the laws say they are an unnecessary interference
in a crucial area of U.S. policy by states that usually have
little expertise in foreign affairs."Foreign policy is uniquely a case where the government
needs to act with one voice," said William Reinsch, president of
the National Foreign Trade Council, which represents major U.S.
companies and advocates against unilateral sanctions.Foreign companies are the main target of the rules since
U.S. firms are largely barred from working in Iran by federal
law.Florida's law led to the State Board of Administration
(SBA), which oversees Florida public investments, pulling more
than $1.3 billion out of companies such as PetroChina and
Russia's Gazprom for their involvement in either Sudan or Iran.
As of 2014, the SBA had $177 billion in assets.Like Florida, Michigan was an early adopter of divestment
policies targeting Iran. It has divested $185 million of its
pension funds from companies including Royal Dutch Shell
, Vodafone, HSBC, and Nokia for their
activities in Iran.In 2013 and 2014 Michigan divested $45 million from Becton
Dickinson and Co., a U.S. medical supplies company that
sells to Iran legally under federal regulations.A Becton Dickinson spokesman said the firm was unaware it
was a target of divestment by Michigan until contacted by
Reuters. It said in a statement that its trade with Iran is
authorized by the U.S. Treasury Department's Office of Foreign
Assets Control, which oversees federal sanctions.Marty Knollenberg, a Michigan state senator who sponsored a
divestment bill in 2008, said the legislation was based in part
on model legislation provided by the American Israel Public
Affairs Committee (AIPAC), a lobbying group that advocates for
further sanctions on Iran."Many other states followed suit, and I think with that
pressure the federal government finally acted," said
Knollenberg, a Republican. "We're all affected by this, not just
the federal government."Richard Nephew, the former principal deputy coordinator for
sanctions policy at the U.S. State Department, said the main
losers in divestment actions are the companies and local
governments, rather than Iran or other target countries."The degree to which such decisions can be made at lower
government levels than the federal governmentgenerally makes
the United States a more complicated, unattractive place to do
business," said Nephew, now with the Columbia University Center
on Global Energy Policy in New York."This is a feel-good measure that, in the end, probably
doesn't feel all that great given the costs it imposes at home."
(Reporting By Yeganeh Torbati; editing by Bruce Wallace and
Stuart Grudgings) Image caption: State by state sanctions on Iran, Reuters map..........................

The Iran dealrequires the United States to “actively encourage officials at the state or local level to take into account the changes in the U.S. policy … and to refrain from actions inconsistent with this change in policy.” Last month [May 2016], the State Department sent letters to each U.S. governor urging states to review and revise their sanctions accordingly.

Recognizing that state sanctions are attempting to “incentivize Iran to change its behavior in certain ways,” the letter argues that since the JCPOA agreement is addressing the same concerns, state level divestment and contracting bans on Iran are not needed.

So far North Carolina’s governor [NC has a different governor since this article was written] has strongly rejected this request from the Obama administration. Several other states will probably refuse to lift their own sanctionswith the ultimate outcome possibly dependent on legal challenges. In the past, the U.S. Supreme Court has upheld the executive branch’s constitutional role in implementing foreign policy by compelling preemption of state sanctions. If the current court takes on this question, perhaps the answer will change. Our research project will continue to track changes, including judicial-level challenges."...